Acquiring luxury property in Indonesia is an attractive way to diversify your investment portfolio.
A property asset that offers high rental yields and strong capital growth can be an incredibly lucrative investment. A well-managed investment property often offers a significantly higher ROI than a traditional investment or bank interest rates. Additionally, real estate is a very popular hedge against inflation.
With a luxury property, you secure for yourself a steady passive income and are granted the unique benefits of luxury home ownership in a top holiday destination.
It’s all in the Details.
As the world readies itself for international travel and the reopening of borders, astute investors from all over the globe are preparing for the inevitable tourism boom in Bali and across Indonesia. This expected upswing will be further supplemented by the emergence of a new affluent market consisting of business owners or executives who can work remotely and wish to spend part of the year in a location that offers a better lifestyle.
Secana Beachtown is Bali’s most in-demand lifestyle residence located on the Berawa beachfront. Cocana Resorts will be Gili Trawangan first 5-star benchmark resort and have the island’s biggest beach club. Kuara is a boutique resort located in the south of Lombok with a focus on sustainability.
These investment properties are uniquely structured as they are entirely managed – meaning no work or maintenance costs for investors. Additionally, all owners receive a proportional share of the pooled rental income from every unit – allowing all investors to benefit from the combined marketing efforts of the project and preventing unnecessary competition between units for bookings and rentals.
Understanding Local Law.
Despite the advantages of luxury property investments, many potential investors initially find the process of acquiring property in a foreign country daunting. As Bali’s leading property developer, Mirah Property Group is able to securely and legally guide investors through the process of acquiring investment property in Indonesia.
Under Indonesian law, a foreign national is not permitted to own land. However, there are legal and legitimate ways for investors to invest in property in Indonesia which secures their investments and grants them rights and protections that are equal to those of a landowner.
Indonesia offers three certificates with regards to land or property ownership:
- Hak Milik aka the right to own (freehold or fee simple title).
- Hak Pakai aka the right to use (leasehold title).
- Hak Guna Bangunan aka the right to build.
A foreign national is unable to personally hold a Hak Milik. However, for properties with an accumulated value of over IDR 10 billion, they are permitted to establish a PMA (foreign investment company) and the PMA can be the title holders of a Hak Guna Bangunan (HGB).
As the holder of a HGB you are entitled to same rights and legal protection regarding your land ownership as an Indonesian company that owns land. Additionally, you are able to sell your land to an Indonesian entity as a freehold property, if you wish.
For properties with an accumulated value of under IDR 10 billion, or for those who do not wish to establish a PMA, a foreign national can hold a Hak Pakai or leasehold over a property.
Advantages of Leasehold Properties.
A leasehold title offers many advantages over a freehold. With a leasehold, you do not need to have a PMA established; you do not need to have an Indonesian entity as a nominee; and, you do not need to be a resident or have any legal status in Indonesia. It’s the most convenient way to control and earn from a property or land asset within Indonesia.
An International Sales Executive of Mirah Property Group, Alexis Sanatafe said, “A foreign citizen will have the same legal rights as an Indonesian citizen on a leasehold property. With properties under 10 billion rupiah, it is the only option to legally own a property. The main benefits are the legalities and protections that they afford.”
He continued to say, “A big part of it, is that most properties are leaseholds. A lot of the traditional Balinese families like to keep the land in the family name – so they continually lease the land down the generations. That is why there are so many leaseholds available. Also, with a 30-year lease, it is usually a third of the price of a freehold property.”
Properties that are sold as a Hak Pakai (leasehold) are significantly cheaper than those sold as a freehold as there is a term limit to the title. In Bali, this is usually 20 years – after which the ownership reverts to the original Hak Milik titleholder. During your leasehold you can sell, transfer, sublease, or gift the remaining years of your lease to anyone.
All units at Secana Beachtown are offered as a 35-year leasehold. This is extendable by an additional 30 years for a total of 65 years. Most leases in the area are limited to 20 years with no built-in guarantee of an extension term.
If the properties at Secana Beachtown were offered as freeholds they would be significantly more expensive. The price of leasehold titles is calculated as 1% of the freehold value, multiplied by the number of years of the lease.
At Cocana Resorts all units are offered as 100-year leaseholds. These can be resold as freehold titles if required, depending on the time of sale.
The generous structure of the leaseholds and extensions terms on Mirah Property Group’s projects allows investors to implement a capital growth strategy that is minimally affected by having a leasehold certificate instead of a freehold certificate.
Because of the reduced cost of initial investment with Secana Beachtown, owners will hit break-even from the rental income around year 6 or 7. Afterwards, they will still own a property that earns a passive income and gain in capital value for the remainder of their leasehold.
“The prime tourist locations appreciate at incredibly high rates. To give you an example – in Batu Balong in Canggu, which neighbours Berawa – the value of leasehold land is 10 to 20 times more than it was only 5 years ago.”
“So if you had a 30-year lease, that started 10 years ago, and you now have 20 years remaining, you still have the opportunity for capital gains should you wish to sell the remaining years,” Alexis Santafe continued to say.
Opportunities to Invest.
Secana Beachtown, Cocana Resorts, and Kuara are all unique development projects which offer different benefits and management programs to cater to your needs and investment goals.
Secana Beachtown will have 58 luxury villas and 32 loft-style apartments and offers the most all-encompassing lifestyle facilities in one complex in Canggu, with three restaurants, a rooftop bar and pool, gym club and sports centre, a co-working space, and full spa facilities including a sauna and hammam.
Cocana Resorts is a 5-hectare resort on prime beachfront land on the idyllic island of Gili Trawangan. Fronted by a white sand beach and crystal clear waters, Cocana Resorts will have a world-class beach club with VIP bottle service and hosting international DJs, two restaurants, and a spa.
Kuara is a boutique resort with a focus on sustainability. It has onsite horse stables, a pottery studio, an archery range, and organic farming with farm-to-table fine dining available at its restaurant. It is nestled in a stunning bay with a white sand beach and close proximity to top surfing spots and a protected national park. The resort offers incredible life changing activities such as jet skiing, jungle trekking, and private island breakfast.
Mirah Property Group is Bali’s leading property developer with over 16 years of experience. The company has delivered over one thousand properties in the best destinations across Indonesia, and have helped thousands of homeowners and investors access exceptional real estate in the world’s top island destinations.
Our in-house legal team and tax consultants will be able to guide you through every step of the purchase process, ensuring that all paperwork is completed and executed correctly and legally – and properly notarized.
If you have any questions regarding our projects or about purchasing an investment property in Indonesia, please don’t hesitate to get in contact.
Written by Mario Roberto